174 Ky. 755 | Ky. Ct. App. | 1917
Opinion op the Court by
Affirming.
This appeal is prosecuted by a motion in this court from a judgment of the Franklin circuit court awarding to the Commonwealth a license tax of thirty cents on each one thousand dollars of the authorized capital stock of the Hillman Land & Iron Co., which is one million dollars.-
The suit to recover this tax was brought by the Commonwealth under the authority of the provisions found in sections 4189a to 4189i, inclusive, of the Kentucky Statutes.
Section 4189b' defines domestic and foreign corporations.
Section 4189c fixes the license tax to be paid and reads as follows: “Domestic and foreign corporations shall pay an annual license tax of thirty cents on each one thousand dollars of that part of their authorized capital stock represented by property owned and business transacted in this state, which shall be ascertained by finding the proportion that the property owned and business transacted in this state bears to the aggregate amount of property owned and business transacted in and out of this state.
“ Provided. That such corporations may pay at said rate upon their entire authorized capital stock; and in that event they shall not be required to report as in subdivision number three of section four (4189d) hereof. And their failure so to report shall be deemed conclusive evidence that such corporation elects to pay upon its entire authorized capital stock, and it shall be its duty so to do, and the duty of the board of valuation and assessment so to fix its license tax.”
Section 4189d provides that the corporation subject to the tax shall annually make reports to the Auditor giving the information described in the section, which includes, “The total amount of its authorized capital stock.” This section further provides that “It shall be the duty of the board of valuation and assessment, from such reports and from such additional information it may require, to ascertain and fix that part of the authorized capital stock of such corporations upon which the license tax shall be based, as herein provided, and to fix the license tax of such corporation at the rate hereinbefore prescribed.”
In the agreed state of facts it is stipulated that the “Hillman Land & Iron Company was incorporated under the laws of Missouri in 1901; its authorized capital
It will be observed that the statute imposes this license tax upon all corporations not expressly exempt from its payment by the statute, which own property or do business in this state, whether foreign or domestic, no discrimination being made between the two classes. Under this statute no account whatever is taken of the issued capital stock or the value of property owned or volume of business done, nor are the corporations subject to the tax required to report their issued capital stock. The license tax is imposed solely on the authorized capital, not the issued capital.
It will further be noticed that the statute requires the corporation to report the value of the property owned and used by the corporation in this state and out of this state, and the proportion of business transacted by it in this state as compared with the volume of business transacted by it in other states, and that when a corporation subject to the license tax owns property or transacts
In short, the purpose of the statute was to treat corporations with perfect fairness by subjecting to the tax only such part of the authorized capital as was represented by property owned and business transacted in this state when property was owned or business done in another state; leaving exempt from the payment of the tax such part of its authorized capital stock as was represented by property owned or business done in other states. Under this statutory rule, when all the property owned by the corporation is located in this state and all of its business is transacted in this state, the amount of the license tax it must pay is arrived at by the simple, method of ascertaining the amount of its authorized capital stock.
In American Tobacco Co. v. Com., 162 Ky. 716, we had before ns a case involving a question very similar to the one presented in this record. In that case the American Tobacco Co. filed a report under the statute showing the amount of its issued capital stock and the amount of its authorized capital stock, and the board of valuation and assessment fixed the amount of the license tax on the issued capital stock, which was much less than the authorized capital stock. The Commonwealth, through one of its revenue agents, brought the suit to recover from the company the license tax on. that part of its capital stock represented by the difference between the capital stock issued and the capital stock authorized, and the court, in sustaining the right, of the Commonwealth to recover the tax claimed, said, in the course of the opinion:
“In fixing a license tax the law takes no consideration of its issued capital stock, and the appellant was not, called upon to state it. But if it did show its- issued stock, as well as its authorized, there was still but one thing for the board to do, and that was to make the calculation upon its authorized capitalization......The board, instead of performing its duty in the way directed by statute, made a mistake and took for its basis of calculation the capital stock issued by the company, instead of the stock which the law authorized it to issue.”
The principal objection urged is to the method by which the statute undertakes to estimate the amount of tax that shall be paid, and it is said, which is true, that it “wholly ignores the value of the property of the corporation, the amount of business it transacts, and the amount of its issued capital stock, placing its liability upon the basis of its authorized capital, a form of stock that has no value, no identity and no existence,” and therefore the imposition of the tax on that part of the capital stock not issued is “fictitious, unreasonable and arbitrary.”
The answer to this argument is that the license tax is not a tax on the property of the corporation or the value of its property. It is a license tax pure and simple on the volume of its authorized capital stock. What the authorized stock of a corporation may be is left entirely —unless limited by statute — within the discretion of the organizers or promoters of the corporation.' The capital stock of the corporation, subject to statutory limitations, can be fixed at any sum and divided into as many shares as the organizers desire. If they choose to place the amount of authorized capital at a much larger sum than is needed to transact the business proposed to be or that is engaged in by the corporation, or at a larger sum than fairly represents the value of the property owned by the corporation or the volume of business transacted by it, that is a matter entirely within their discretion. But when the organizers, do voluntarily fix what the amount of the capital stock shall be, then the legislature has the authority to- say that the corporation, if it owns property in this and other states, or does business in this and
Counsel concedes the power of the state to exact this license tax on the issued capital stock, but insists that a license tax issued on the capital stock authorized, but not issued, is the exertion of an arbitrary power accomplished by the imposition of a tax on something that has no existence, and is therefore taking* the property of the corporation without due process of law, in violation of the 14th amendment to the Constitution of the United States.
But, as we look at it, the exaction of this tax is neither upon a fictitious value nor is it arbitrary or taking property without due process of law. On the contrary, it is nothing more than the imposition of a reasonable privilege tax upon what the corporation voluntarily said was the amount of its authorized capital. A tax upon the authorized capital is no more a tax upon a fictitious value than would be a tax upon the issued capital stock that was not represented by either property or business. Capital stock issued but not represented by anything of value has no more substance than capital stock authorized but never issued. If the state has the power, and this is admitted, to impose a license tax upon the issued capital stock, we are unable to perceive why it has not the
In its last analysis tlie question comes down to the power of the state to exact a license tax from corporations doing business in the state, and when this power is admitted, the only remaining’ question is, is the license tax an unreasonable or arbitrary one? Subjected to this test, plainly a license, tax of 30 cents on the thousand dollars is neither arbitrary nor unreasonable. '
The state, according to our view, is not limited to the. assessment of a tax on the issued capital stock, or so much of it as is actually represented by property or business, although it might have thus limited the tax if it had seen proper to do so. As an easy, simple and constitutional scheme of taxation, it adopted the method of fixing’ the tax on the authorized capital without inquiring how much of that capital had been issued or what it represented. Under this method all corporations, foreign and domestic, are treated precisely alike and the .sum that each must pay for the privilege of owning property in or doing business in this state is left to the organizers or directors of the corporation.
"Wherefore, the judgment is affirmed.